Hunter v. Henning , 259 Pa. 347 ( 1918 )

Opinion by

Mr. Justice Stewart,

This is an appeal from the judgment of the Superior Court, reversing a judgment of the Common Pleas Court of Allegheny County. The case will be found reported in 64th Superior Court Reports, page 366. The original action was brought by a receiver of an insolvent bank to recover from the defendant, here the appellee, the amount due on a note for $950, of which he was maker. The liability of the defendant on the note was not in dispute, nor was the amount due, namely, $400. The only question in the case arose with the attempt on the part of the defendant to set off against the plaintiff’s demand two several deposits that had been made by the defendant in the bank prior to its declared insolvency, one to the credit of himself as “executor of E. O. Anderson” in $150.64, and one to the credit of himself as “trustee of J. Dorothy Henning, a minor,” in $205.41, The trial court refused the set-off and judgment was accordingly rendered in favor of the receiver for the full amount of the claim sued on. Appeal was taken from the judgment so entered to the Superior Court, with the result that the judgment of the lower court was there reversed, the appellate court holding that the set-off should have been allowed. This states the whole case'on its facts, and these give rise to a single question of law.

Were these several demands, that is to say, the note on which' suit was brought and the several deposits in bank offered as set-offs, due in the same right? In other words, the right of action for the recovery of the note being concededly in the plaintiff, did the defendant have a corresponding right of action to recover from the bank the several deposits above specified? If he had such right, the cáses cited in support of the conclusion on which the judgment of the Superior Court is rested are not only apposite, but fully vindicate the judgment; otherwise, they come short of the purpose for which they are cited. It Avas no part of the judicial purpose in any of these cases to abate anything from or qualify in any degree what Gibson, C. J., in Stuart v. The Com., 8 Watts 74, calls “a cardinal rule in the interpretation of statutes of set-off,” and Avhich he says “requires that there be mutuality of demand both as regards the quality of the right and identity of parties.” By mutuality in quality of right is to be understood mutuality of right with respect to the legal remedy provided for the enforcement of the several demands. The plaintiff here sues the defendant in the latter’s own right, on his individual indebtedness. Except as it is available for the defentlant to sue the bank in his oavii right to recover the bank deposits, there is no mutuality in quality of right. This becomes apparent when the purpose of the statute is considered. This, as repeatedly declared, is the avoidance of circuity of action. “The foundation of set-off,” says Mitchell, J., in Hibert v. Lang, 165 Pa. 439,' “is the prevention of circuity of action. It is therefore the general rule that cross-demands must be held in the same persons and in the same rights so that actions may be maintained thereon each against the other.” To be mutual the cross-demand here set up must be shown to belong individually to the defendant with corresponding right to sue for the same in his individual name, otherwise the debts cannot be said to be due in the same rights. The case of Wolfersberger v. Bucher, 10 S. & R. 10, relied upon as sustaining 'the right of set-off here claimed is not in any way inconsistent with Avhat Ave have said, but supporting rather. There the action was brought on a note given by the defendant for the price of goods purchased at a sale of an intestate’s effects. The plaintiff in the action Avas, the administrator, but the action Avas brought in his individual name, which the court, for reasons unimportant here, held to be proper, and that he had a right of action within himself. The debt offered to be set off was due by the intestate in his lifetime. It was disallowed in the court below, and on appeal the disallowance Avas affirmed by this court in the following explicit language: “This, then, is an action brought by a man in his OAyn right in which there Avas an offer to set off a demand due by him as administrator; and it is Avell settled that such set-off cannot be allowed. ......In this case the plaintiff would be at liberty to join with the present cause of action any demand proper in other respects, although without the slightest cast (sic) of being due to him in a representative character; Avhich shows he was the OAvner of the debt and not merely entitled to the remedy; and the establishing of that point, independent of any other ground, is decisive of the question.”

In the present case, the action was brought not by tliobank, but by the receiver in his representative capacity. The offer of set-off was a demand due from the bank, if in any event to the defendant, due him only in his representative character as executor and as trustee. In the case cited, the decision rested distinctly on the ground of want of mutuality — that the debts due were not due in the same right. In the case in hand, the demands offered as set-off are not due the defendant, J. F. Henning. If it be assumed that the legal title to the funds that are the basis of these demands was once in him as administrator and trustee, under the doctrine of Wolfersberger v. Bucher, supra, he had divested himself of that legal title when he segregated them from his own funds in the manner he did; depositing neither in the bank as his own, but designating each in a way showing unmistakably to whom it belonged. In doing so he put it beyond his legal right to exercise any control whatever over either deposit, unless in his representative capacity. His individual check upon either deposit the bank could have safely dishonored; it could have honored such check only at its peril, for in his individual capacity it owed him nothing. Each deposit was a special appropriation by the defendant of trust funds in his hands; he had no property right in either; neither could have been attached by his individual creditors, and in case of failure of the bank he would have been exempt from loss. German National Bank v. Foreman, 138 Pa. 474. These deposits, made in the way they were, can only be regarded as an equitable assignment for the uses designated. Nor does the case of Wolf v. Beales, 6 S. & E. 241, also cited and relied on, conflict. There the defendant was sued to recover a debt he individually owed; the cross-demand he set up was plaintiff’s indebtedness on a bond given to one Pearson, and by Pearson transferred to the defendant. From the condition in the bond it appears that the money due was payable to the obligee named, in trust for another. On this bond plaintiff could have sued only as trustee, not having the right of action thereon in himself. It was so held and the set-off was refused solely on this ground, the court by Gibson, J., saying: “It may be stated as a general rule, that the person having the right of action may set off a debt due to him as trustee against a debt due by him in his own right,....... but it is extremely clear that the right to set-off must depend on either the right of action or the right of property, and here the defendant had neither. The bond was not assignable under the act of assembly, being payable only to the obligee himself, who was, therefore, not authorized to transfer the right to sue on it at law, and the property in the money it was given tó secure being another’s, he could not transfer an equitable right of action, which can pass only as an incident of the right of property. On what ground, then, could the defendant below have sustained a suit? Only, if at all, as trustee having a remedy — as therefore the defendant could not have sustained the suit on the bond, the court was right in refusing to permit him to set it off.” If we are correct in saying that in the present case the plaintiff could not have maintained an action against the bank for the recovery of these deposits, except in representative capacity, then, instead of supporting the contention of the appellee, the case goes directly to the contrary. The case of Solliday v. Bissey, 12 Pa. 347, is readily distinguished from the present one. There it was a fact, expressly so stated by the court, that the debt set off was a debt owing the executors on their own contract and in their own right, the court adding: “In all cases of promises, express or implied, made to or by an administrator after the death of the intestate, and the same holds as to executors, the action lies by and against the administrator personally.” It was upon this legal right that the set-off was allowed. Solliday v. Bissey, 12 Pa. 347, a case cited in the opinion of the court in Jack v. Klepser, 196 Pa. 187, calls for no present consideration, for however applicable there, it is without relation to the question here being considered.

The case turns upon the question of mutuality in quality of right with respect to these counterclaims. The action was against the defendant in the latter’s own right, that is to say, for his individual debt; what he claimed to set off was a demand against his creditor in which he had no property right himself, not even the right of possession, and for the recovery of which he could sue only, if at all, in a representative character. The manifest effect of allowing such a set-off would be to enable a debtor to pay a debt of his own with money belonging to other people. This cannot receive judicial sanction.

Our effort has been to show the absence of the mutuality the law requires in such cases. If we have succeeded, and we think the authorities cited support this view, then it must follow that the lower court was correct in refusing to allow the set-off urged.

The judgment of the Superior Court is reversed..